Aam Admi to Save up to Rs 50,000

INCOME TAX SLABE

"This budget belongs to Aam Admi." Thus spoke the Finance Minister earlier this morning. And to his credit this bears out in the broad reduction in tax slabs that he announced. As a result, the common man can save up to approximately Rs 50,000 per annum. Additionally, the Budget 2010 also offers an annual deduction of Rs 20,000 towards an investment in long-term infrastructure bonds, on top of whatever 80C deduction a taxpayer might have taken.

If you earn up to Rs 3 lakhs per annum, then there will be no change in your tax liability. If you earn between Rs 3 lakhs to Rs 5 lakhs, you can now save up to Rs 20,000 per annum. And, if you earn between Rs 5 lakhs to Rs 8 lakhs, you can now save between Rs 20,000 to Rs 50,000.

The above amounts are substantial enough, and are expected to help promote higher consumption which will further boost our economy. Whether these savings are used to buy big ticket items such as electronics or white goods, or spent towards daily consumption, or used for investing towards meeting financial goals, the common man will find many ways to take advantage of this tax break.

The following are the new tax slabs according to your gender and age that might be applicable to you.

For Men

New Income Tax Slab

Tax Rate
Old Slab Rates

Up to Rs 1,60,000
Nil
Up to Rs 1,60,000

From Rs 1,60,001 to Rs 5,00,000
10%
From Rs 1,60,001 to Rs 3,00,000

From Rs 5,00,001 to Rs 8,00,000
20%
From Rs 3,00,001 to Rs 5,00,000

Above Rs 8,00,001
30%
Above Rs 5,00,001

For Women

New Income Tax Slab

Tax Rate
Old Slab Rates

Up to Rs 1,90,000
Nil
Up to Rs 1,90,000

From Rs 1,90,001 to Rs 5,00,000
10%
From Rs 1,90,001 to Rs 3,00,000

From Rs 5,00,001 to Rs 8,00,000
20%
From Rs 3,00,001 to Rs 5,00,000

Above Rs 8,00,001
30%
Above Rs 5,00,001

For Senior Citizens

New Income Tax Slab

Tax Rate
Old Slab Rates

Up to Rs 2,40,000
Nil
Up to Rs. 2,40,000

From Rs 2,40,001 to Rs 5,00,000
10%
From Rs 2,40,001 to Rs 3,00,000

From Rs 5,00,001 to Rs 8,00,000
20%
From Rs 3,00,001 to Rs 5,00,000

To show you an actual example of the scope of savings, lets look at the hypothetical case of Mr Mukherji, an individual tax payer. His salary income is Rs 10 lakhs and he takes full benefit of the 80C deduction available to individuals. The table below compares Mr Mukherji’s tax liability under the old slabs (pre-budget) and new slabs (post-budget), and demonstrates the savings that he can achieve under the new rules announced in Budget 2010.

Particulars

Pre-Budget
Post-Budget
Savings

Mr. Mukherji’s Salary Income for the Year
Rs 10,00,000
Rs 10,00,000

Investments under section 80C
Rs 1,00,000
Rs 1,00,000

Additional Investments in Long-term Infrastructure Bonds
Rs 20,000
Rs 20,000

Computation of Taxable Income

Salary Income
Rs 10,00,000
Rs 10,00,000

Less: Deductions for:

- Savings under Section 80C
Rs 1,00,000
Rs 1,00,000

- Investment in Long Term Infrastructure Bonds
Nil
Rs 20,000

Net Taxable Income
Rs 9,00,000
Rs 880,000

Computation of Tax Liability

Tax Liability on:

- Rs 0 to Rs 160,000
Nil
Nil
Nil

- Rs 160,001 to Rs 300,000
Rs 14,000
Rs 14,000
Nil

- Rs 300,001 to Rs 500,000
Rs 40,000
Rs 20,000
Rs 20,000

- Rs 500,001 to Rs 800,000
Rs 90,000
Rs 60,000
Rs 30,000

- above Rs 800,001
Rs 30,000
Rs 24,000
Rs 6,000

Total Income Tax
Rs 1,74,000
Rs 1,18,000
Rs 56,000

Add : Education Cess
Rs 5,220
Rs 3,540
Rs 1,680

Total Tax Liability
Rs 1,79,220
Rs 1,21,540
Rs 57,680